WHY FINANCIAL WELLBEING SHOULD BE IN YOUR BUDGET FOR NEXT YEAR

At a glance:

• Stress and mental-health issues can affect employees’ performance and productivity, leading to low morale and unplanned absences.
• Employee wellbeing is no longer just an internal matter – it’s also something investors are increasingly looking at from an ESG perspective.
• Money worries are a key issue, with the majority of UK businesses affected by poor employee financial wellbeing. Tackling this is crucial for any company that is committed to supporting the mental health of its staff.

Financial education can help employees make better decisions and feel more empowered, confident and secure.

The idea that a company’s biggest asset is its workforce is hard to dispute. So it stands to reason that if they can invest in something that benefits both the employees and the business, and that is shown to boost productivity, most companies wouldn’t hesitate.

However, translating that sentiment into more tangible terms might not be that easy. After all, how do you compare the value of your employees with the value of your property or intellectual property, for instance – especially if employees are easier to replace? But there’s one area in which investing in employees simply makes sense, both for them and for the company: their wellbeing.

Common sense = business sense

If the majority of your employees spend most of their waking lives at work, the troubles and stress they experience in their personal lives will inevitably seep in. Employers can be sure that at any given time, at least some employees will be affected by stress and mental-health issues that undermine their ability to perform. It’s estimated that the problem could cost the UK economy more than ￡4 billion every year1.

“Employee wellbeing is a big root cause of how productivity changes,” explains Harriet Shepherd, Workplace Financial Education Project Manager at?St. James's?Place Wealth Management. “If you have a lot of stress, productivity goes down, morale goes down, and time and brainpower are affected. Using parts of your day to deal with issues such as financial problems will have an impact on your productivity and your capacity to think about other things.”

In other words, worries don’t go away just because you’re at work. “It's completely understandable, but it has a business impact too, so it's beneficial for everyone for those instances to be reduced and for people to feel supported,” says Shepherd.

Investing in employees to mitigate those risks is clearly not just a ‘good’ thing to do, but positive for the bottom line too. It also forms part of a company’s environmental, social and governance (ESG) considerations. The ‘S’ component of ESG covers the relationships that companies have with employees, customers, suppliers and the wider community.

While the employee aspect can be easy to overlook, the COVID-19 pandemic saw employee wellbeing climb the list of issues that investors look at in companies from an ESG perspective.2?In other words, employee wellbeing is no longer just an internal issue. “Companies are now being held more to account socially for employee wellbeing, so they need to be aware of that and be able to show what they're doing,” says Shepherd.

Taking the strain

One factor that has a substantial impact on an employee’s wellbeing is their relationship with their finances. Research in 2019 found that 94% of UK employees had money worries, with three-quarters reporting that those concerns affected their work. Almost nine in 10 larger UK businesses say they have been impacted by poor employee financial wellbeing, through outcomes such as reduced productivity, loss of talent and more short-term and long-term absences.3

Financial worries can affect anyone. Financial wellbeing isn’t just about how much money you have, but also about how secure, confident and empowered you feel financially, according to the Money and Pensions Service. Tackling financial wellbeing is therefore vital to any company that is committed to supporting the mental health of employees.

This is partly about emotional support, but there’s a practical element too, especially when it comes to helping employees build their financial confidence and wellbeing. In some cases, it will begin with financial education and equipping people with the tools to manage their finances effectively. “This is where providers of financial education are helpful – improving people’s day-to-day confidence and resilience as well as addressing their future and what’s worrying them,” says Shepherd.

Maximising the benefits

Partnerships between companies and financial organisations can also help firms communicate their existing reward packages more effectively. As Shepherd points out, employees often need support when making decisions about those opportunities.

“It’s really important to help people translate what the different arrangements can mean for them,” she says. “You only need to look at the number of people still in the default fund of their pension plan. While it will be right for some, more often it indicates that they haven’t engaged with their pension or even their wider benefits package, suggesting perhaps that they need support in doing so.”

Financial education is about equipping people with the ability to make informed choices and giving them the information they need in order to feel more confident, Shepherd explains. “If you have someone there supporting you and talking you through the financial implications of what they’re doing, even just having that peace of mind is reassuring,” she says. “You worry less when you have someone in your corner.”

To find out more about our Workplace Financial Education Programme, please get in touch.?St. James's?Place also supports the National Wellness Conversation, which works with organisations to encourage employees to talk more openly about their finances.

Sources:

1?Employee wellbeing: the changing dynamics of financial health, LCP, 2021 (Based on a survey sample size of 10,000)

2?Workplace wellness and employee mental health – an emerging investor priority, Harvard Law School Forum on Corporate Governance, December 2020

3?25 million UK employees affected by money worries while at work, Close Brothers, March 2019 (Based on a survey sample size of more than 5,000 employees and more than 1,000 employers)